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D. Laflèche
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Files: 11585-17
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11783-2/ss. 123(1)
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Subject:
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Lease assignment from XXXXX
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This is in reply to the memorandum from XXXXX of your office wherein he requested an opinion concerning a lease assignment agreement between the above-noted parties.
Our understanding of the facts is as follows:
• XXXXX (hereinafter called the Assignor) has entered into an agreement with XXXXX (hereinafter called the Assignee) where the Assignor sells, assigns and transfers to the Assignee all of its right, title and interest in a) the lease, b) the leased equipment, c) all rent and other sums payable, d) all warranties, ... and e) all other security agreements ... held by the Assignor as security for the payment and performance of the obligations of the lessee. The agreement specifically provides that the sale, assignment and transfer of the property vest in the Assignee all of the Assignor's right, title and interest in such property.
• The agreement stipulates that the Assignor will manage and administer each lease as agent for the Assignee, that the Assignee will not assume any obligations under the lease or in respect of any equipment, and that the Assignor will honor such obligations as are binding on it under each lease.
• The Assignor will indemnify the Assignee against all claims, demands and losses relating to any lease or any equipment and shall indemnify and save the Assignee harmless from and against any and all liability and loss, incurred arising out of the Assignor's negligent or wrongful performance of its obligations.
• The Assignor and the Assignee agree that, except as expressly set out in the agreement, any difference between the net proceeds realized under any enforcement proceedings and the amount owing to the Assignee under any lease, will be solely for the account of the Assignee. They further agree that the Assignee shall have no recourse against the Assignor for the obligation of any lessee.
• If the lessee fails to pay rent under a lease, the Assignor shall continue to remit to the Assignee for 30 days after the default, the amount equal to the unpaid rent due, unless it obtains the Assignee's written consent.
• The Assignee may elect not to have the Assignor act on its behalf or can rescind its authorization given to the Assignor to do so. As a result of this, the Assignor's rights and obligations will cease, and the Assignee will enter into possession of such leases and assume all rights and obligations. The Assignee shall have no recourse against the Assignor for the obligations of any lessee under any lease.
• The Assignee agrees to reassign any lease with the equipment and other property related to the Assignor a) if the lessee wishes to upgrade the equipment or the lessee is in default and the Assignor wishes to repurchase the lease package, or b) at the Assignor's option for $ 1.00, when the lessee exercises the purchase option or when the lease expires.
• The Assignee can't sell or assign its interest in the lease package outside of a reassignment to the Assignor and an assignment to an affiliate of the Assignee.
You requested our opinion as to whether the assignment from XXXXX is a taxable supply of the lease and leased equipment, or an exempt supply of a financial service (the supply of the lease stream).
Based on the above facts, it is our view that XXXXX is a taxable supply of the lease and leased equipment since the agreement states that the "sale, assignment and transfer of the property ... vest in the Assignee ... all of the right, title and interest of the Assignor in such property". Our opinion in this regard is based upon a legal opinion we have received concerning the agreement.
If you have any questions, please contact Duncan Jones at (613) 952-9210 or Danielle Laflèche at (613) 952-0329.
J. Sitka
A/Director
Financial Institutions and Corporate Reorganizations
GST Rulings and Interpretations
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